Breaking news

Dairy Farmers consider future as tough times continue

Western Australia's dairy farmers are facing another tough year with an oversupply of milk triggering a further drop in farm gate prices in 2010.

Early last year, the global financial crisis took its toll on the dairy industry with farm gate prices in WA falling by up to 20 per cent.

The price reduction saw the average farmer lose around $200,000 of annual income.

At the time processors, including Fonterra Australia's Brad Voss, said they had no choice.

"The reduction is purely a reflection of the difficult trading conditions we are experiencing both domestically and globally," he said.

Exits considered

A recent Dairy Australia survey found one in ten WA farmers were considering leaving the industry.

However, Peter Evans from the WA Farmers Federation said the survey found WA was still faring better than the Eastern States.

"Western Australia was amongst the highest proportion of farmers who actually said they'll be producing more milk in three years than what they are now so there's obviously a group there that are still very, very positive," he said.

Despite the positive outlook, farmers are facing yet another price drop this year.

Fonterra Australia's prices are down more than 10 cents a litre on the same period last year and Challenge Dairy says prices will average around 40 cents a litre throughout summer, that is about 5 cents a litre down on the same time last year.

Mr Evans put the drop in prices down to a number of factors.

"We've got two things working against each other, we've got rising international prices because there still is demand for milk and that is helping but here in WA we've got a little bit too much milk because of our reduced processing capacity which is having a downward pressure on our price," he said.

Powdered milk

Mr Evans says the problem is exacerbated by powdered milk being imported into WA.

"Part of it is caused by one company bringing in milk powder to make their flavoured milks with and part of it is UHT coming into the state, so the demand for milk has quickly reversed in Western Australia," he said.

He says powdered milk has become more entrenched in the industry over the past 12 months and that is having an impact.

"That's milk that's expected to come from Western Australia's farmers and it's not."

Mr Evans says processors need to be looking for new markets to deal with the oversupply.

"If we look like having a surplus of milk next spring that's certainly going to affect the price that the processors pay us so they need to look for new markets to place that product in," he added.

Demands for inquiry

"They are reconstituting it and putting it into flavoured milk so I think it's a serious breach of the public's security in so far as they are not getting the product they are really and truly paying for," he said.

He believes the future of the industry is at risk.

"I think there needs to be an inquiry at Government level into the industry and its pricing and the security of the industry going forward," he said